Faculty of Education and Economic Studies

Department of Business and Economic Studies

The impact of club card on store loyalty - An empirical study of a Swedish grocery retailer

Sofia Ahlström Niklas Wangsell

January 2014

Second Cycle

Supervisor: Aihie Osarenkhoe

 

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Acknowledgement

We would like to thank our supervisor Aihie Osarenkhoe for his commitment to this study.

Without his advice and counseling this study would not have been possible. We would also

like to thank all of the respondents for answering our survey.

Sofia Ahlström and Niklas Wangsell

Gävle, Sweden 2014

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ABSTRACT

Title: The impact of club card on store loyalty – An empirical study of a Swedish grocery retailer

Level: Master thesis in Business Administration

Authors: Sofia Ahlström and Niklas Wangsell

Supervisor: Aihie Osarenkhoe

Examiner: Maria Fregidou-Malama

Date: 2014- January

Aim: The aim of this study is to investigate whether club card loyalty have an impact on customers store loyalty. A secondary purpose is to distinguish which attributes of a loyalty card that ICA’s customers prefer, with the focus on the variables; direct- versus indirect rewards, monetary- versus nonmonetary rewards, necessary- versus luxury rewards and immediate- versus delayed rewards.

Method: A survey with 20 questions was constructed with the help of previous research made in the field of loyalty. The data was collected outside ICA Maxi, the largest ICA store in a city in Sweden with approximately 100.000 citizens. A random sample was used and each 5th person that walked by was asked to participate. A total of 282 individuals were asked, and 114 were willing to participate. The data was analyzed with the help of the statistical analyze program SPSS, a correlation- and cluster analysis were made.

Results and conclusions: A substantial finding in the study was a positive correlation between both behavioral- and attitudinal aspects of loyalty with club card loyalty. A positive correlation between behavioral loyalty and club card loyalty were 0.305, compared to a positive correlation of 0.292 between attitudinal loyalty and club card loyalty. The types of rewards were in line with previous research, however the findings of the timing of reward was contrariety to previous research since the respondents preferred delayed rewards.

Suggestions to further research: A comparison between two different loyalty programs would give an enhanced perception of what the Swedish customers actually prefer. Since the lack of consensus exists, more similar studies need to be done to fill this gap.

Contribution of thesis: The thesis adds a small piece of the puzzle to the subject loyalty programs in the Swedish market. It also gives ICA the opportunity to evaluate their program and suggestions are made on how to improve their loyalty program.

Keywords: loyalty, loyalty programs, customer loyalty, club card, behavioral loyalty, attitudinal loyalty, rewards, and grocery retailer

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Table of Contents 1.0 Introduction  ................................................................................................................................  7  

1.1 Background  ...........................................................................................................................................  7  1.2 Purpose and research question  .........................................................................................................  9  1.3 Limitations  .............................................................................................................................................  9  1.4 Disposition  .............................................................................................................................................  9  

2.0 Theoretical discussion  .............................................................................................................  11  2.1 Loyalty  ..................................................................................................................................................  11  

2.1.1 Behavioral Loyalty  .......................................................................................................................................  12  2.1.2 Attitudinal Loyalty  .......................................................................................................................................  13  2.1.3 Club card loyalty  ...........................................................................................................................................  14  

2.2 Type of rewards  ..................................................................................................................................  16  2.2.1 Direct- versus indirect rewards  .................................................................................................................  16  2.2.2 Monetary- versus non-monetary rewards  .............................................................................................  17  2.2.3 Necessary- versus Luxury rewards  .........................................................................................................  17  

2.3 Timing of rewards  ..............................................................................................................................  18  2.3.1 Immediate versus delayed rewards  .........................................................................................................  18  

2.4 Reflections on the theoretical discussion  ............................................................................  19  

3.0 Methodology  .............................................................................................................................  21  3.1 Epistemological and ontological considerations  ..........................................................................  21  3.2 Research method for the present study  .........................................................................................  22  

3.2.1 Approach  ..........................................................................................................................................................  22  3.2.2 Data collection and respondent selection  ..............................................................................................  23  3.2.3 Selections of scales  .......................................................................................................................................  24  

3.3 Research strategy  ...............................................................................................................................  25  3.4 Tools for statistical measurement  ...................................................................................................  27  

3.4.1 Pearson’s Correlation  ...................................................................................................................................  27  3.4.2 Cluster analysis  ..............................................................................................................................................  27  

3.5 Reliability and validity  ......................................................................................................................  28  3.6 Possible methodology errors  ............................................................................................................  29  

3.6.1 Errors in quantitative research  ..................................................................................................................  29  3.6.2 Errors in survey research  ............................................................................................................................  30  

3.7 Ethical considerations  .......................................................................................................................  30  

4.0 Empirical findings  ...................................................................................................................  31  4.1 ICA Loyalty program  ........................................................................................................................  31  4.2 Result  ....................................................................................................................................................  32  4.3 Measurements of store loyalty  .........................................................................................................  34  

4.3.1 Behavioral Loyalty  .......................................................................................................................................  34  4.3.2 Attitudinal Loyalty  .......................................................................................................................................  36  

4.4 Type of rewards  ..................................................................................................................................  38  4.4.1 Direct vs. Indirect rewards  .........................................................................................................................  38  4.4.2 Monetary vs. Nonmonetary rewards  ......................................................................................................  39  4.4.3 Necessary vs. Luxury rewards  ..................................................................................................................  40  

4.5 Timing of rewards  ..............................................................................................................................  41  

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4.5.1 Immediate vs. Delayed rewards  ...............................................................................................................  41  

5.0 Analysis  ......................................................................................................................................  42  5.1 Correlation Analysis  ..........................................................................................................................  42  

5.1.1 Behavioral Loyalty  .......................................................................................................................................  42  5.1.2 Attitudinal Loyalty  .......................................................................................................................................  43  5.1.3 Type and timing of rewards  .......................................................................................................................  44  

5.2 Cluster Analysis  ..................................................................................................................................  47  5.3 Summary of the analysis  ...................................................................................................................  51  

6.0 Conclusion  .................................................................................................................................  52  6.1 Answering the research questions  ..................................................................................................  52  6.2 Managerial, societal and theoretical implications  .......................................................................  53  6.3 Critical reflections of our study  ......................................................................................................  54  6.4 Proposal to further research  ............................................................................................................  54  

References  ........................................................................................................................................  55  

Appendices  .......................................................................................................................................  59    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table of Figures Figure 1. A disposition of the present study ........................................................................... 10

Figure 2. Relationship between club card loyalty and behavioral- and attitudinal loyalty ..... 20

Figure 3. Type- and timing of rewards .................................................................................... 20

Figure 4. Correlation guidelines ........................................................................................ 27, 33

Figure 5. Number of clusters and respondents ........................................................................ 28

Figure 6. Reliability Statistics ................................................................................................. 28

Figure 7. Bryman and Bells’s four sources of error in social survey research ........................ 30

Figure 8. ICA and ICA’s competitors market shares in the Swedish market .......................... 31

Figure 9. Question 1 ................................................................................................................ 34

Figure 10. Question 9 .............................................................................................................. 35

Figure 11. Question 16 ........................................................................................................... 35

Figure 12. Question 3 .............................................................................................................. 36

Figure 13. Question 12 ........................................................................................................... 36

Figure 14. Question 17 ........................................................................................................... 37

Figure 15. Question 4 ............................................................................................................. 38

Figure 16. Question 5 ............................................................................................................. 38

Figure 17. Question 15 ........................................................................................................... 39

Figure 18. Question 14 ........................................................................................................... 39

Figure 19. Question 11 ........................................................................................................... 40

Figure 20. Question 10 ........................................................................................................... 40

Figure 21. Question 7 .............................................................................................................. 41

Figure 22. Question 6 .............................................................................................................. 41

Figure 23. A revised version of figure 2 ................................................................................. 42

Figure 24. A revised version of figure 3 .................................................................................. 44

Figure 25. Cluster 1 ................................................................................................................. 48

Figure 26. Cluster 2 ................................................................................................................. 48

Figure 27. Cluster 3 ................................................................................................................. 49

Figure 28. Cluster 4 ................................................................................................................. 50

Figure 29. Cluster 5 ................................................................................................................. 51

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1.0 Introduction This chapter intends to introduce the complete purpose with this study. The background, the

aim and the research questions will be explained, as well as the limitations that have been

made. Lastly, a disposition figure is presented to give an overall picture of how this study is

structured.

1.1 Background The availability of new and creative technologies gives companies the possibility to develop

new tactics to implement their CRM initiatives. Customer loyalty programs is one of the

tactics that companies has adapted since loyalty is an important key to an organizational

success and profit (Lack, 2000) and are critical in conducting business in todays competitive

marketplace (Komunda and Osarenkhoe, 2012). According to McIlroy and Barnett (2000, p.

348) loyalty can be described as “customer’s commitment to do business with a particular

organization, purchasing their goods and services repeatedly, and recommending the

services and products to friends and associates”

In the 1970ies, European researchers found that a business that have a close

relationship with their customers simply have “better” customers, since loyal customers are

more profitable to a firm (Dowling & Uncles, 1997). Selin et al., (1988) states: “that those

customers that demonstrate the greatest level of loyalty toward the product, and service

activity, tend to repurchase more, and spend more money” (cited in Divett et al., 2003, p.

109). Loyal customers can even become business builders if they tend to be loyal to a

company over time; they are buying more, paying higher prices and generating new

customers through positive word of mouth (O´Brien and Jones, 1995). “It has been estimated

that attracting a new customer is three to five times more costly than retaining an existing

customer” (Jang and Mattila, 2005, p. 402).

Demoulin and Zidda (2009) state that a way for retailers to retain customers is to

implement a loyalty program, where the loyalty card scheme is a common tool. Retailers

invest in customer loyalty programs to affect customer value as well as increase value for the

firm (Demoulin and Zidda, 2009). The same study mentions that there are three purposes to

why firms normally use loyalty cards: retaining customers, increase their loyalty and collect

data about their customers shopping behavior. Additionally, Dowling and Uncles (1997)

mention six reasons as why business chooses to engage in loyalty programs: to preserve

sales, margins and profit; enhance loyalty and value for the existing customer; evoke existing

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customer’s cross-product sale; diverse the brand from competitors brands; preempting the

entry of a new (parity) brand; and finally preempting the competitors to introduce a similar

loyalty program. The largest grocery retailers in Europe chose to implement loyalty programs

and loyalty cards in the 1990ies (Mauri, 2003) and more companies continued to follow the

trend (O´Brien and Jones, 1995). In the Swedish market, three of the largest grocery retailers:

ICA, COOP and Willy’s have implemented loyalty programs in their operations. ICA

introduced the ICA-card and loyalty program in 1990 (“En kort väg till banken - ICA-

historien,” 2014), COOP introduced their “Medmera-card” in 1993 (“En hållbar historia,”

2014) and Willy’s introduced their loyalty program as late as 2013 (“Willys lanserar

lojalitetsprogram - Axfood,” 2014).

Since grocery retailers has been introducing loyalty programs for the last 23 years and

are still doing it today, it suggests that the issue of loyalty cards are evolving and growing

due to the fact that its adaptation is ongoing. The big question is whether it is effective or not.

Previous studies have disagreed if loyalty programs and loyalty cards are effective since the

outcome of different studies in this topic have diverged. Lal and Bell (2003) and Noordhoff

et al. (2004) have found that loyalty programs do affect purchase behavior and therefore

should affect the business profitability positive, while Sharp and Sharp (1997) and Mägi

(2003) presented mixed results whether loyalty programs do generate any effect on purchase

behavior and therefore has no effect on profitability. The fact of mixing evidence makes this

subject an interesting topic to study since the outcome is hard to predict.

To succeed with creating a loyalty program that influences purchase behavior,

previous researchers conclude that different factors need to be considered. Jang and Mattila

(2005) studied what kind of rewards that customers prefer, while Keh and Lee (2006)

researched which timing of the reward that customers prefer. Both concepts of timing and

type of reward have previously been researched in the field of loyalty programs. Type of

rewards refers to what kind of attributes the reward contains, whereas the timing is referred to

when the rewards are available for the customers. The most common types of reward in

previous studies are direct versus indirect, monetary versus non-monetary and necessary

versus luxury, while timing of rewards include immediate versus delayed (Jang and Mattila,

2005; Dowling and Uncles, 1997; Rowley, 2007; Yi and Jeon, 2003).

Loyalty programs are an important topic today, especially in the retail business. On

the Swedish market the amount of grocery stores has been cut in half between 1985 to 2010,

and one out of ten is operating at a loss (“Grafik: Antal butiker i dagligvaruhandeln 1985-

2010 - Nyheter (Ekot) | Sveriges Radio,” 2014). Attracting new customers and retaining old

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ones can therefore be crucial if the grocery store wants to gain and retain a stable profit. Our

hopes are to contribute to a greater understanding in the field of loyalty cards in general and

especially in the Swedish grocery retailer market. This study gives a greater understanding of

the reward preferences of the Swedish customers.

1.2 Purpose and research question The purpose of this study is to investigate whether club card loyalty have an impact on

customers store loyalty. The grade of club card loyalty as well as store loyalty will be

analyzed and compared with the help of a survey investigation. Additionally, the purpose is

to distinguish which attributes of a loyalty card that customers prefer, with the focus on the

variables; direct- versus indirect rewards, monetary- versus non-monetary rewards,

necessary- versus luxury rewards and immediate- versus delayed rewards. This study will

hopefully help grocery retailers to evaluate their loyalty programs and construct them to fit

the preferences of the Swedish customers.

Our research questions state:

- Does club card loyalty have an impact on customers store loyalty?

- Which attributes of a loyalty card do customers prefer?

1.3 Limitations This study focus on four groups of reward attributes; direct versus indirect, monetary versus

non-monetary, necessary versus luxury and immediate versus delayed. The study is limited to

those reward attributes since these were most mentioned in research of loyalty programs in

the grocery retail business. This study is also limited to the grocery retailer ICA in Sweden

and focuses on the customers’ perspective.

1.4 Disposition The study will be presented in the order that the below figure illustrates. Firstly a theoretical

discussion is included to showcase all the relevant theories used. Secondly a chapter about

the methodical choices made in the study is presented. After the methodology chapter our

empirical findings will be presented both graphically and in text form. The analysis will

follow where it is intended to compare the findings with the relevant theories. A conclusion

chapter will follow with the main points highlighted and further discussed. Lastly suggestions

for further research are presented.

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Figure 1. A disposition of the present study (Source: Own construction)

 

 

 

 

 

 

 

 

Theoretical  discussion   Methodology   Empirical  

@indings   Analysis   Conclusions  Suggestions  for  further  research  

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2.0 Theoretical discussion Under the theoretical discussion the intention is to give an overall perspective of the subject

loyalty and its subcategories behavioral loyalty, attitudinal loyalty and club card loyalty. The

different types of rewards and timing of rewards that are relevant are explained as well. This

chapter ends with a reflection on the theoretical discussion including our own models.

2.1 Loyalty In line with Sharp and Sharp (1997), Leenheer et al. (2007, p. 32) define loyalty programs as

“an integrated system of marketing actions that aims to make member customers more

loyal”, while Yi and Jeon (2003, p. 231) define loyalty as “repeated purchases of particular

products or services during a certain period of time”. McIlroy and Barnett (2000) explain

that loyalty programs are often implemented to reward the customers for their patronage,

when customers enter a lasting relationship with the organization. The customers often want

to continue the relationship when they feel that they receive a better offer and a better value,

than they would obtain from competitors (McIlroy and Barnett, 2000). In agreement with the

previous statement, Dowling and Uncles (1997) claim, “loyalty programs must enhance the

overall value for the product or service and motivate loyal buyers to make their next

purchase” (cited in McIlroy and Barnett, 2000, p. 349)

With help of loyalty programs, managers can increase the share of the customers’

total purchase and increase customer satisfaction (Mägi, 2003). It is more costly for a

company to attain new customers, than to get the current ones to purchase repeatedly,

maintaining and developing the customers’ loyalty can therefore be seen as a sustainable

competitive advantage (Dowling and Uncles, 1997). A loyalty program is often based on

several assumptions:

1. Customers prefer a more engaged relationship with the products they purchased. (Yi

and Jeon, 2003)

2. Some of the company’s customers show a tendency to be loyal. (Yi and Jeon, 2003)

3. There is a profitable group that buys the product/service. (Yi and Jeon, 2003)

4. The possibility to reinforce and enhance these customers loyalty through the loyalty

program. (Dowling and Uncles, 1997)

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A loyal customer is more profitable for firms and helps firms increase their revenue

since they are generally buying more, paying premium prices and introduces new customers

to the firm with the help of positive word of mouth (O´Brien and Jones, 1995). McIlroy and

Barnett (2000) therefore argue that a loyal customer not only develops a long-term

relationship with the firm, they also act as a cost-effective link for the firm. The authors

continuing by discussing that satisfaction is an important factor for the loyal customer since

the customer can be satisfied without actually being loyal, however loyalty cannot exist

without satisfaction, a dissatisfied customer will never return. The customer will be satisfied

if their expectations are met, the degree of loyalty is shown by the customers involvement

and their grade of repurchase behavior (McIlroy and Barnett, 2000).

Previous studies in the field of loyalty have shown that the aim of creating a loyalty

program is to implement a win-win situation for the company and its customers, with the help

of rewards and participation in these loyalty programs customers will have no negative

experiences (Sharp and Sharp, 1997). Stauss et al. (2005) do however mention, in contrast to

Sharp and Sharp (1997) that some customers have shown frustration against the loyalty

programs, three of the reasons mentioned are:

1. If the customer does not receive the promised reward.

2. If the customer needs to add material and mental cost in order to enjoy the reward.

3. If the customer feels that he or she are treated differently in a negative context

compared to other customers.

Few firms are systematically evaluating their loyalty programs if they are truly achieving

their goals with creating value for the customer, while those firms who do not evaluate their

programs may never discover the problems the can occur for the customers in the loyalty

program context (Stauss et al., 2005).

2.1.1 Behavioral Loyalty In the late 1970ies loyalty was originally conceived in behavioral terms where loyalty was

typically examined through the customers repeat purchase behavior (Bridson et al., 2008).

Demoulin and Zidda (2009) takes this notion even further by explaining that earlier studies in

customer loyalty field were strictly considered to have the characteristics of repeated

purchase patterns and high shopping frequency.

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The behavioral dimension of loyalty has been researched numerous times and consists

mainly of two elements: repeat purchase and word of mouth behaviors (Bridson et al., 2008;

Leenheer et al., 2007; Sharp and Sharp, 1997). In a study on customer loyalty in the grocery

retailing business, Leenheer et al. (2007) key dependent variable to capture behavioral loyalty

is characterized by a high repeat-purchase behavior. Sharp and Sharp (1997) explains that

certain loyalty programs that emphasizes on building repeat-purchase behaviors operates very

differently from other marketing efforts and therefore differ from the likes of marketing

campaigns and sales promotions. An increased repeat-purchase loyalty can form a closer

relationship with customers that allows the company to increase the knowledge about its

customers needs and wants, thus being able to supply better service at a substantial lower cost

(Sharp and Sharp, 1997).

Interestingly Noordhoff et al. (2004) found that there are differences on the impact

that behavioral loyalty has on club card loyalty between Singapore and The Netherlands. In

the study, Noordhoff et al. (2004) could not find a significant correlation in The Netherlands

although the researchers did find a significant correlation in Singapore. In Sharp and Sharp

(1997) study their results points to that an effective loyalty program should have an impact on

repeat-purchase behavior. The study also found that it is clearly possible to alter the repeat-

purchase behavior to some small degree and concludes that loyalty programs are probably the

only marketing effort that can address this change.

Both Noordhoff et al. (2004) and Keh and Lee (2006) mentions that behavioral

loyalty as a central dependent construct has been facing criticism from some authors since

repeat purchase behavior does not always provide an accurate measure by itself as a loyalty

measure. A behavioral approach is often only used when evaluating the impact of loyalty

cards on store loyalty since the ease of measurement (Demoulin and Zidda, 2009). However

according to the critics, using only the behavioral aspect does not capture other moderating

variables such as norms and situational factors that influences the customers decision to

patronize a specific store (Noordhoff et al., 2004). Noordhoff et al. (2004) stresses the

importance to not only look at the behavioral aspect of loyalty but also incorporate the

attitudinal aspect to get an accurate prediction of the overall loyalty.

2.1.2 Attitudinal Loyalty Loyalty in the retail business has previously been researched and has operationalized the

attitudinal concept of loyalty as the customers’ commitment (Bridson et al., 2008). Jacoby

and Chestnut (1978) defines attitudinal loyalty as “the customer’s predisposition towards a

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store as a function of physiological process, which includes attitudinal preference and

commitment to the store” (cited in Noordhoff et al., 2004, p. 352). The attitudinal concept of

loyalty captures the emotional and mental attachment of the individual to a store or brand

(Noordhoff et al., 2004).

Unlike behavioral loyalty the attitudinal aspect focus on a more long-term relationship

built through commitment rather than a short-term repeat-purchase behavior (Bridson et al.,

2008). Attitudinal loyalty infers that customers enact in extensive problems-solving behavior

that involves brand and attribute comparison which leads to a strong brand preference

(Bennett and Rundle-Thiele, 2002). Noordhoff et al. (2004) explain that while attitudinal

loyalty is considered a mediator that affects behavioral loyalty, the measurement is a

prerequisite for understanding how it affects cognitive and affective processes that ultimately

make a customer remain loyal.

Uncles et al. (2003) argue that without a strong attitudinal commitment to a brand,

“true” loyalty cannot exist. Demoulin and Zidda (2009) also stress the fact that sustainable-

or “true” loyalty only exists when customers have favorable attitudes or a high preference for

the store or brand. Demoulin and Zidda (2009) mention that in attitudinal loyalty research,

commitment is repeatedly used to measure the aspect of attitudinal loyalty. Committed

customers will therefore demonstrate a higher degree of support for the loyalty program

(Demoulin and Zidda, 2009). In the study made by Demoulin and Zidda (2009) it was shown

that commitment (attitudinal loyalty) had a greater impact on the loyalty program than

behavioral loyalty measures.

Some researches tends to argue that most loyalty programs are nothing but saving

programs in disguise that do not at all contribute to the attitudinal aspect of loyalty and

therefore do not create any form of sustainable loyalty (Noordhoff et al., 2004).

2.1.3 Club card loyalty The loyalty card was created for the purpose to strengthen store loyalty and to build a

stronger customer relationship (Mauri, 2003), it is also acts as a efficient way for customer to

show that they deserve special attention (Dowling and Uncles, 1997). The link between

loyalty and the loyalty card membership is important since it can be the deciding factor if the

customer want to maintain or build a relationship with the retailer (Rowley, 2007). The

loyalty card permits retailers to collect market research information of their customers

shopping behavior, however this information does not represent all customers of the

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company, only the ones that are enrolled in the loyalty program (Mauri, 2003; Dowling and

Uncles, 1997).

Gillbert (1999) state: “loyalty card aim to build greater customer loyalty and

retention; develop methods of creating long-term relationships and lead ultimately to

increased sales and profit” (cited in Turner and Wilson, 2006, p. 959). According to Bellizzi

and Bristol (2004) and Rowley (2000) card-based programs does often require the customer

to use a individualized plastic-card every time they “check out” from the store. When the

card is being scanned, the customer gets a special price on the goods, compared to the non-

cardholder, or/and are able to collect point that can be used on a later occasion when they

revisit the store (Bellizzi and Bristol, 2004).

According to Uncles (1994) some customers feel that the loyalty club card enacts a

sense of belonging and a feeling that the retailer is ready to listen and care about them. Mauri

(2003) cautions that just because customers subscribe to the loyalty scheme, customer loyalty

does not automatically rise. The customer has to use the card repeatedly; optimally for the

retailer is when the card is used every time the customer visits the store (Mauri, 2003).

Research in the field of loyalty cards done by Wright and Sparks (1999) showed that 23% of

their target group did not use their card every time they purchased goods, additionally the

card was normally not used when the goods were paid with a small amount of cash.

Mauri (2003) argue that the card is an effective tool for retailers to gain additional

knowledge about its customers, but only if the card is used frequently. The customer

involvement with the card is however linked to the kind of reward that the customer receives,

since customers’ demand of the reward is generally higher if they have a higher involvement.

Moreover Mauri (2003) also discuss that because of these demands, the reward plans has

become more complex and sophisticated. Many European retailers have created “pure loyalty

cards”, which has lead to that the card has become an icon and a brand in itself (Mauri,

2003).

According to Rowley (2007) an additional problem for club card loyalty is that

customers are members of many different loyalty programs, even within same industry. This

can be seen as a disloyal move by the customer, and the retailer therefore has go the extra

mile to meet the customers needs and always try to construct the best offers (Rowley, 2007).

The result in the study made by Bellizzi and Bristol (2004) showed that customer that have

three membership-cards were less loyal compared to the customers that only had one loyalty

card.

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The question if loyalty cards truly generate a loyalty behavior is discussed in different

perspectives by many researchers. On one side Bellizzi and Bristol (2004) argues that loyalty

cannot be received through loyalty cards. Divett et al. (2003) also supports this notion and

claims that loyalty cannot be bought, as well as Jenkinson (1995) that states, “The customer’s

loyalty is simply not for sale. It cannot be bought for ever by companies or deals” (cited in

Rowley, 2000, p.391). In contrast, Sharp and Sharp (1997), Noordhoff et al. (2004) and

Demoulin and Zidda (2008) all found in their research that loyalty cards have a positive

correlation on customer loyalty, concluding that card holders are more loyal than non-card

holders.

2.2 Type of rewards In this section the four different types of rewards are described and explained thoroughly.

2.2.1 Direct- versus indirect rewards Yi and Jeon (2003) argue that direct rewards are directly connected to the specific product

and/or the brand and the value that it enhances. Indirect reward is the opposite in the sense

that it is not relevant to the specific product and the reward is supposed to motivate the

customers to become loyal through an indirect way (Yi and Jeon, 2003).

Dowling and Uncle (1997) states that an indirect reward can be seen as a primary

reward if the outcome is out of proportion to the money that have been spent. Dowling and

Uncle (1997) continues by explaining that it can however create a disadvantage for the

company if the primary reason for purchase of the product or brand only is a result to achieve

the indirect reward, since once the indirect reward disappear, so will the customer. For that

reason a direct reward should be more efficient compared to an indirect reward in building

customer loyalty since it increases the value for the product (Dowling and Uncles, 1997).

Both Yi and Jeon (2003) and Keh and Lee (2006) agree with Dowling and Uncle (1997) that

direct rewards are in most situations preferable to indirect rewards.

Yi and Jeon (2003) state that customers focus more on the products they purchase

than products they don't, so direct rewards that are related to these products normally gets

more attention and creates a greater value for the customer. Keh and Lee (2006) found in

previous studies that customers are more satisfied when rewards and purchase from the same

kind of categories are exchanges, compare to if the categories differ. Keh and Lees (2006)

findings in their own study also supports that notion, since they conclude that direct rewards

are preferable when the customers are satisfied, no form of reward is however effective when

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the customer is dissatisfied. They continue by concluding that direct rewards are preferable in

high-involvement conditions.

2.2.2 Monetary- versus non-monetary rewards Monetary benefits are explained in previous research as a way for the customer to save

money. Joining a loyalty program and continuously purchasing from the same retailer or the

same brand, customers develop monetary savings with help of coupons and cash-back

offers. An example presented in research of monetary rewards is “earn 5% cash back on

purchases”. Non-monetary benefits can, in contrast to monetary, be seen as a value-added

service that instead saves time and not money for the customer. Time could potentially be

saved through easier and faster payment desks so the costumers can enjoy a more effortless

shopping experience. Non-monetary benefits also let the customer feel that they are specially

treated and the benefits therefore are easily recognized. Previous research discuss that non-

monetary benefits are intangible and it is therefore harder for other firms to copy the same

idea or concept. Even small benefits can differentiate very similar loyalty programs from

each other. (Mimouni-Chaabane and Volle, 2010)

Mimouni-Chaabane and Volle (2010) does however not discuss whether monetary or

non-monetary benefits are most preferable. They argue that a firm should focus on both

monetary and non-monetary benefits, they should promote both as a reason why to enroll in

their loyalty program. Jang and Mattila (2005) however do argue that their focus group

showed that monetary rewards are more preferable since they provide more flexibility for the

customer.

2.2.3 Necessary- versus Luxury rewards The two factors, necessary- and luxury rewards, are measurements of the customers’

preferences and requirements of a particular reward (Jang and Mattila, 2005). A luxury

reward is defined as an item or service that enhances a luxurious lifestyle, e.g. expensive

wine, while necessary rewards on the other hand is defined as an essential items that a person

need to consume, e.g. food, clothing and medical care (Jang and Mattila, 2005; Kivetz et al.,

2004).

According to Kivetz et al. (2004) previous research found that luxury items are less

preferable for customer then necessary items since they can create a feeling of guilt, on the

other hand previous research also argued that luxury items are associated with a positive

  18  

sense of pleasure while necessary items can create a feeling of discomfort. Kivetz et al.

(2004) continues by stating that a few previous studies has shown that respondents prefer

luxury rewards over necessary rewards, one explanation in a grocery retailer setting can be

that the customers perceived value of the reward is higher if the customer has to visit the

store on 40 occasions instead of 10 occasions. If the requirement of the loyalty program is

higher, the customers perceived value of the chosen reward would be higher as well (Kivetz

et al., 2004).

Kivetz et al. (2004) research shows that customers are likely to prefer luxury rewards

to necessity rewards and that customers are more likely to join a reward programs if they

offer luxury rewards. Jang and Mattila (2005) result was contrary to Kivetz et al. (2004),

since their study concluded that customers prefer necessary rewards rather than luxury

rewards.

2.3 Timing of rewards In this section the timing of rewards is described and explained thoroughly.

2.3.1 Immediate versus delayed rewards According to Dowling and Uncle (1997) the availability of the reward is one of the deciding

factors when attracting customers to loyalty programs. The construct of timing of reward is

divided into two factors, the first being immediate rewards, which can be explain as a reward

that is given to customers directly upon purchase, e.g. every time they visit the store. A

delayed reward on the other hand is acquired after the customer has been visiting the store a

certain amount of times (Yi and Jeon, 2003). Yi and Jeon (2003) continue by explaining that

a customer’s degree of involvement in the reward process makes the customer prefer either

an immediate- or delayed reward. Rowley (2007) claims that immediate rewards are more

effective than delayed rewards when building loyalty in low-involvement situations.

Continuing on this notion Uncles and Dowling (1997) argue that a low-involvement situation

results in loyalty for the program instead of loyalty for the product or brand. Yi and Jeon

(2003) also state that immediate rewards, such as lotteries, are recommended for a low-

involvement customer.

The perceived value of the reward is also a depending factor whether the customer

prefers an immediate- or delayed reward. Keh and Lee (2006) mentions that previous studies

has shown that customers tend to prefer delayed rewards if it is of a higher perceived value,

since the higher perceived value of the reward is more attractive to the customer. Keh and

  19  

Lee (2006) concludes in their own study that a delayed reward tends to be more successful if

the customer is already satisfied, the opposite was also concluded that immediate rewards

tends to be more successful if the customer is already dissatisfied. In general, the majority of

the research concludes that costumers prefer immediate rewards to delayed rewards (Dowling

and Uncles, 1997; Jang and Mattila, 2005; Rowley, 2007; Yi and Jeon, 2003). Dowling and

Uncles (1997) also claim that psychological research has shown that customers tend to be

less motivated towards delayed rewards compared to immediate rewards.

A frequently used system of delayed rewards used by the majority of retailers

according to Jang and Mattila (2005) is based on the collection of reward points. The authors

explains that the customer acquires a certain amount of points for every purchase made and a

certain number of points is equal a particular reward. Jang and Mattilas (2005) result

concludes that 83% of the customers in their study preferred immediate rewards to the point

reward system, even though the point reward system is one of the most commonly used

loyalty reward schemes today.

2.4 Reflections on the theoretical discussion The theoretical framework in the topic of store loyalty and club card loyalty are diverged

between researchers. While some researchers argue that a loyalty schemes are nothing but a

marketing gimmick that does not add any affect on store loyalty, some argue the complete

opposite (Bellizzi and Bristol, 2004; Lal and Bell, 2003; Mägi, 2003; Noordhoff et al., 2004;

Sharp and Sharp, 1997). There is clearly a gap in the theoretical framework since researchers

do not agree on the outcomes. This deviation between researchers could possibly be a result

that they design their research differently; different variables are used to explain the concept

of the different dimension of loyalty.

Since the loyalty programs are a quiet new entity, meaning that they have not been

around for decades and therefore could not have been studied for the amount of time that it

takes to create a unified theoretical framework. As most research that deals with human

behavior, it is hard to measure and can be conducted is a vast amount of ways creating a

barrier for researchers to come up with some form of unified theory. Because of the diverging

theory this study has adapted the concepts and questions that were though relevant from our

perspective to create a most accurate explanation of the concept. The following model was

created to explain the relationship between club card loyalty and behavioral- and attitudinal

loyalty.

  20  

Figure 2. The relationship between club card loyalty and behavioral- and attitudinal loyalty.

(Source: Own construction)

In the theories surrounding customers reward preference, the theoretical framework is not as

diverged compared to the theoretical framework surrounding loyalty. Notably is that most

researchers agree on what types of rewards are preferable in the majority of situations and

can support their claims with empirical evidence that is comparable amongst the different

studies. Because of this lack of diversion it will be interesting to investigate if this study can

provide evidence that contradicts the generally accepted framework. The following model

was created to graphically explain the opposites sides of each type and timing of rewards.

Figure 3. Type- and timing of rewards. (Source: Own construction)

  21  

3.0 Methodology In the methodology section the intention is to give an overall perspective of how this study

are conducted. The chapter will start with epistemological and ontological consideration to

show a broad perspective on acceptable knowledge. The categories; approach, respondents

selection and selection of scales will be explained, as well as the tools that has been used for

the analysis. A research strategy will also be presented to show the process in the study from

the start until finish.

3.1 Epistemological and ontological considerations Epistemological issues include the notion of what is regarded as acceptable knowledge, as a

central questions in the subject is whether or not the social world can or should be studied

with the same procedures as natural sciences (Bryman and Bell, 2007). It is necessary that we

as authors have our opinions of what our views of reality and knowledge are, in turn to be

able to interpret our empirical findings.

Epistemological considerations can be explained as how to view knowledge and how

to interpret it. Researchers can view knowledge from a positivistic position that claims that

there has to be a clear distinction between theory and research. The intention with the theory

is to generate hypotheses that can be tested thoroughly through empirical scrutiny

(deductivism). Theoretical knowledge must have been extensively tested to be valid. An

Inductivistic view argues that knowledge derives inductively through observations.

Researches who take an interpretivism position, in contrast to positivism, focus on how

humans resonate which is based on reflections of their behavior. The purpose is to understand

human behavior and actions that are individually perceived in a social environment. (Bryman

and Bell, 2007)

Ontological considerations regards whether a social reality exists or not. Objectivists

believe that there exist things that are certain that consists outside of our reach that we cannot

affect. They therefore believe that social reality does not exist. I.e. an organization; it has

rules and regulations and follows standardized procedures. The same states with cultures,

which are widely, shared values that civilians follow in order to be considered “good”

citizens. Constructionism compared to objectivism, believes that reality only consist though

individual interpretations. (Bryman and Bell, 2007)

As our aim is to capture the relation between club card loyalty and store loyalty we

use a deductive approach, it can also be argued that we have taken a positivistic knowledge

  22  

stance. All theory in the subject was collected from previous validated research and our study

is therefore designed with an influence from previous research. In the ontological

considerations it can be argued that our research does not take a stand for either objectivists

or constructionism. The people participant in our study may have opinions from both a

cultural perspective, as well as from an individual perspective. We cannot therefore make a

clear statement in this subject.

3.2 Research method for the present study Our purpose of this study is to investigate whether club card loyalty have an impact in

customers store loyalty, as well as to see which attributes of a loyalty card that the customers

generally prefer. Through the use of a survey, collected outside the grocery store ICA to

target the right segment, this study is in line with a quantitative research study (Bryman and

Bell, 2007).

3.2.1 Approach  A quantitative research study aims to measure a few variables with many participants; the

raw data gathered is often analyzed with the help of various statistical measurements

(Bryman and Bell, 2007). With help of previous researches in the subject of loyalty programs

and rewards, the purpose for this study was carried out to determine if club card loyalty has

an impact in customers store loyalty, as well as which attributes the customers prefer. This

study is therefore in line with a deductive research approach, since it testing previous theory

(Bryman and Bell, 2007). Since this study's approach is in line with a quantitative, deductive

research study, the choice fell naturally on a cross-sectional research design, as that particular

method often is equated with surveys (Bryman and Bell, 2007). The method is preferable

when you handle a lot of quantifiable data from surveys. The majority of previous research in

the subject of loyalty programs and rewards has used surveys (Bellizzi and Bristol, 2004;

Bridson et al., 2008; Demoulin and Zidda, 2009; Mägi, 2003; Noordhoff et al., 2004; Sharp

and Sharp, 1997; Turner and Wilson, 2006). Bryman and Bell (2007) argues that hypothesis

testing is not often used in qualitative studies but rather in studies with an experimental

approach. This study therefore contains research questions instead of hypotheses.

  23  

3.2.2 Data collection and respondent selection To be able to measure if club card loyalty have an impact in customers store loyalty in the

Swedish grocery store ICA, the respondent need to posses a ICA loyalty card and be a

member in the ICA loyalty program. The choice fell naturally that the surveys needed to be

collected outside an ICA store, as the chance increases dramatically to actually find

participants that have acquired an ICA loyalty card. The study will be conducted in a

Swedish town with approximately 100.000 citizens and we chose to collect the surveys

outside ICA Maxi, the largest ICA grocery store in that town, since it should consist of most

people in movement. Turner and Wilson (2006) collected 60 surveys in a similar study in

England; thus, we are aiming for 120 participants in the study to get the highest reliable

results as possible.

Since our expectation is to be able to generalize the collected data to ICA’s members

in Sweden, a probability sample will be used, with systematic random samples of

respondents. Bryman and Bell (2007) states that choosing systematic random sampling, the

human factor in the sampling will be eliminated, and each unit in the population has an equal

chance to be selected.

Sullivan (1994, p. 1297) explains how random sampling can be used: ”A random

sample – for example, taking a random start within the first x cases and then selecting every

xth cast from a list that contains every case filed. The number x is a function of the desired

sample size. This procedure approximates randomness because there is no selection of which

particular case will fall into the sample.” Our sample will, just like Sullivan (1994)

explained, be conducted so that each 5th person will be asked to participate in the study. The

non-response rate is a combination of those who did not want to participate in the study as

well as those who did not possess an ICA club card. Bryman and Bell (2007) claims that

there must be a certain caution on how to generalize to the population of the study. This study

will therefore be generalized only to the Swedish members of ICAs loyalty program and

cannot be generalized to other grocery stores in Sweden. Since previous studies such as

Turner and Wilson (2006) generalized their result to all the Tesco club card members in

England, with 60 participants, this study should be able to generalize the result of 120

participant to all the ICA club card members in Sweden.

To be able to analyze the data from our sample, a correlation analysis will be

conducted to determine if the club card loyalty have an impact on customers store loyalty.

Previous research such as Turner and Wilson (2006), Mägi (2003) and Leenheer et al. (2007)

  24  

has done a correlation analysis as well. Additionally, a cluster analysis will be conducted to

segment the loyalty card customers of ICA. All the variables, the rewards, demographic, and

loyalty measures will be integrated in the cluster analysis and the variables of rewards will

also be presented in a descriptive way to show what is preferable.

3.2.3 Selections of scales In our survey we chose to measure the variables except the demographic variables with the

VAS (Visual Analog Scale). The VAS scale consists of a 10-centimeter long line where the

respondents make a mark where on the line they see themselves according to a certain

statement. At the start of the line it is written “Do not agree”, “Do not prefer” or “Never”

while on the end of the line it states “Strongly agree”, “Heavily prefers” or “Always”

depending on how the statements is formulated.

Most previous research has exclusively used the Likert scale, however we believe the

VAS is preferred in our study. Lingjærde and Regine Føreland (1998) explains that the

benefits with adopting the VAS scale is that the scale is easily understood and executable at

the same time as it is not very time consuming. Additionally the VAS scale offers a higher

precision since it utilizes a scale ranging between 1 and 100 while the Likert scale only

utilize a scale ranging from 1 to 7 or 1 to 5.

As our study is not as extensive as previous research our intention was to make the

survey as easily understandable and user friendly as possible to retain a potentially higher

response rate. Our intentions were also to keep the survey short while asking the right

questions. Davey et al. (2007) states that the VAS scale is preferable over the Likert scale

when the amount of space is limited in the survey. Each answer is then measured with a ruler

with millimeter precision resulting in a high precision of the respondent’s answers.

The demographic variable income was created with help of statistics from The

Swedish statistical bureau (“Statistikskolan” 2012). Since the average income was stated in

income in a year terms we opted to reduce it to income per month for the convenience of the

respondents. A 7 scale were created with the average income per month in the middle and

gradually expanding upwards and declining downwards.

  25  

3.3 Research strategy To be able to achieve the purpose of this study, the first step was to search for relevant theory

in the subject of loyalty programs. The terms used for searching were “loyalty + schemes”

and “loyalty card + rewards”. We began our search at Google Scholar, a search engine for

academic articles which led us to the broad field of loyalty, 63 000 articles were found which

suggests that the subject has been researched extensively. After reading through a hefty

amount of relevant academic articles it was clear that some were used as a basis for the

subject (Mägi, 2003; Noordhoff et al., 2004; Sharp and Sharp, 1997; Turner and Wilson,

2006; Yi and Jeon, 2003; Dowling and Uncles, 1997). A matrix was made in order to

categorize the constructs as well to more clearly see which authors discussed the different

constructs. The matrix made can be found in appendix 1. By doing this extensive research in

the field of loyalty it was clear that “behavioral loyalty”, “attitudinal loyalty” and “club card

loyalty” were three of the most common concepts (Demoulin and Zidda, 2008; Mauri, 2003;

Noordhoff et al., 2004; Rowley, 2000). Our purpose therefore became to measure “if club

card loyalty has an impact on customers store loyalty”. We use a deductive approach, which

is common when the research purpose is to test whether the theory works in practice (Bryman

and Bell, 2007). Already tested questions from previous research were used in our

questionnaire to measure “behavioral loyalty”, “attitudinal loyalty” and “club card loyalty”.

Bryman and Bell (2007) argues that which variables measured and the way they are

measured, reliability is an important factor. Using questions already tested by other

researchers leads to a high reliability and validity in our study.

Since it is also in our interest to investigate what kind of rewards ICA’s customers

prefer. The most commonly referred variables was chosen in that field of research; Direct

versus Indirect (Dowling and Uncles, 1997; Rowley, 2007; Yi and Jeon, 2003), Immediate

versus Delayed (Dowling and Uncles, 1997; Jang and Mattila, 2005; Keh and Lee, 2006),

Monetary versus Non-monetary (Jang and Mattila, 2005; Mimouni-Chaabane and Volle,

2010) and Necessary versus Luxury (Jang and Mattila, 2005; Rowley, 2007; Kivetz and

Simonson, 2002). In this case, it was natural to choose these four variables, since they were

well mention in previous research. The critical aspect of this choice is however that we could

not find any questions related to the rewards that were asked by any of these researchers.

From our interpretation of the concept that was derived from previous knowledge we

constructed questions of our own.

  26  

The choice of data collection fell on surveys since the majority of previous research

used this technique. Bryman and Bell (2007) explains that a benefit with surveys is that it is

adapted to each of the respondents needs, as they can in their own phase complete the survey

as well as the ability to become anonymous. There are however also disadvantages to

consider, it is not possible to ask any follow up questions, the non response rate can be

substantial and there is a risk that not all the information can be reaped if the respondent

decides not to answer all the questions (Bryman and Bell, 2007). Although weighing the

benefits and the disadvantages we still consider surveys to be the best choice in this study,

and our target is to collect a total of 120 surveys. Totally the survey consists of 20 questions,

9 questions regarding the variables of loyalty, 8 questions regarding the variables of rewards

and 3 questions regarding the demographical variables. All of the questions were translated

from English to Swedish in order for the respondents to relate to the questions more easily.

We collected our data at ICA Maxi, the largest grocery store in the region. We got

permission from the management to ask customers at the checkout counters, which allowed

us to incorporate all of visitors into our sample. A random sample were used which in

practice means that we asked every 5th person or family that passed. During a weekend in

December we collected 114 surveys, which is an acceptable amount. Totally 282 individuals

were asked to participate which resulted in a non-response rate of close to 60%. The non-

response rate was however slightly higher than we initially expected. Bryman and Bell

(2007) states that survey response rate has fallen in recent years due to individuals being less

inclined to take the time and answer surveys. That could be the case, although we are critical

to our positioning at the store since we believe we would have gotten a higher response rate if

we were allowed to stand at the entrance rather than the exit of the store. Speculating why

customers decided not to answer could depend on stress and a general reluctance to answer

surveys. As the study is aimed at ICA’s customers the non-response rate should not have

been able to been lowered by the methodological choices made in the study.

After all the surveys were collected, statistical analyses were conducted on the raw

data with help of the statistical analysis program, SPSS. A correlations analysis was

conducted to distinguish whether club card loyalty have an impact on customers store loyalty.

Additionally a cluster analysis was conducted to segment the respondents so they could be

analyzed.

 

  27  

3.4 Tools for statistical measurement In this section the two relevant statistical measurements, correlation- and cluster analysis are

explained.

3.4.1 Pearson’s Correlation The information gathered concerning Behavioral-, Attitudinal- and Club card loyalty are

interpreted though a Correlation Matrix that is created with the help of the statistical

measurement software, SPSS. Pallant (2001) describes that a correlation analysis is used to

determinate the strength and direction of the linear relationship between two different

variables. Correlations are different from causality in the sense that a correlation does not

reveal whether one factor caused the other (Pallant, 2001). Therefore it is not possible to

determine if question 1 prompted a high rating for question 2 and vice versa. The result of a

Pearson’s correlation can only take on values from -1 to +1 (Pallant, 2001). Meaning that the

result can either have a positive or negative correlation. The size of the value does however

reveal the strength of the relationship between the two variables (Pallant, 2001). A correlation

result close to 1 is regarded as strong. For the analysis of the correlations Cohen (1988)

provides the following guidelines:

Figure 4. Correlation guidelines. (Cohen, 1988)

The whole correlation matrix that was used to interpret the empirical findings can be found in

appendix 4.

3.4.2 Cluster analysis As a complement to the correlation analysis, a cluster analysis will be conducted with the

help of the statistical analyst program SPSS. The cluster analysis uses different algorithms

and methods to group the respondents into categories without giving explanation or

interpretation (“Cluster Analysis”, 2012).

In an optimal cluster analysis the clusters should be evenly spread amongst women

and men. However in our cluster analysis this could not be achieved and the clusters ended

  28  

with 2 female clusters and 3 male clusters. The number of respondents in each cluster should

also be as evenly spread as possible. Below in figure 5 the respondents spread amongst the

cluster can be observed. The entire cluster analysis can be found in appendix 6.

Number of Cases in each

Cluster

Cluster

1 11,000

2 31,000

3 24,000

4 22,000

5 26,000

Valid 114,000

Missing ,000 Figure 5. Number of clusters and respondents

3.5 Reliability and validity Reliability is whether the concept and the result are reliable and if the study can be replicated

with the same result (Bryman and Bell, 2007). Since the theoretical foundation for this study

derives from previous research, where authors have researched the subject for many years

(e.g. Uncles et al., 2003; Uncles, Mark D., 1994; Uncles and Dowling, 1997) as well as that

their articles have been used in similar research by other researchers, indicates that the

sources used for this study are reliable. To further clarify the credibility, we as authors have

both participated with collecting the surveys as well as that all the questions were closely

controlled and measured by both authors. To get a measurement of how reliable the gathered

data is the statistical measurement Cronbach's alpha is used. According to Tavakol and

Dennick (2011), the Cronbach’s alpha value should lie between 0.7 and 0.95 to be

acceptable, the maximum value is 1. A lower value than 0.7 can depend on a low amount on

questions or too heterogeneous variables. The Cronbach’s alpha is also a measurement if the

gathered data is good enough to endure even more advanced statistical procedures. As seen in

figure 6 the data achieved a Cronbach’s alpha of 0.83, which is considered reliable.

Reliability Statistics

Cronbach's

Alpha

N of Items

,830 20

Figure 6. Reliability Statistics (Source: SPSS)

  29  

Validity concerns whether the conclusions from a survey make sense to the aim that

was intended and there is according to Bryman and Bell (2007) different types of validity.

Internal validity regards if the relationship between two or more variables are sustainable, for

example if variable X affect variable Y, or if there is another reason which allows X and Y to

indicate an apparent relationship. External validity regards how high the validity is for the

individuals that has been chosen to participate in the study, i.e. the importance of creating a

representative sample. To increase the validity in this study, questions from previous

researches have been used so the relationship between store loyalty and club card loyalty will

be credible. The selection of respondent is also carefully chosen, since it only consists of

individuals who possess an ICA club card. The external validity is therefore considered high,

since all of the respondents are in the target group and have a complete understanding for

ICA and the loyalty program.

3.6 Possible methodology errors There are possibilities that methodological errors can occur during a study. The intention

with this chapter is to present possible errors in a quantitative research as well in a survey

research.

3.6.1 Errors in quantitative research Bryman and Bell (2007) mention that direct criticism against quantitative research exists:

• This kind of research do not take into consideration that the participant of the study

has a different perception of the concepts, and that they understand the questions in a

similar way.

• It often ignores the fact that the participant of the study may not have enough

knowledge to do a correct answer on the questions.

• The statistic data can show a misleading picture of the reality, since it’s not clear that

result is linked to the “everyday” context. The social reality in the statistic can be

separated from the individuals that create it.

Bryman and Bell (2007) claim that there are mainly two reasons why it can be hard to carry

out research in general. The first being that teachers of research methodology cannot teach

about all the eventualities that may occur, they may show an acceptable way to do a research.

The second problem is that even the researchers are competent and follow the praxis of how

  30  

research should be conducted, factors such as time; money and feasibility can also be reasons

for not being able to go through with the study.

3.6.2 Errors in survey research There is, according to Bryman and Bell (2007) four errors that can occur during a survey

research.

Figure 7. Bryman and Bells’s four sources of error in social survey research (Bryman and

Bell, 2007, p. 202)

Sampling error is referred to as not able to collect a representative sample, even probability

samples are used. Sampling-related error refers to if the selection of data is too small or if the

grade of incorrect samples and non-response is too extensive. This is a problem that can

occur during the sampling procedure. Data collection error consists of questions that weren't

formulated good enough in the survey. The fourth and last one, data processing error, refers

to mistakes in handling the collected data, such as uncorrected coding. (Bryman and Bell,

2007)

3.7 Ethical considerations Bryman and Bell (2007, p. 138) mention that Code of Ethical conducts suggests: “It is the

duty of Academy members to preserve and protect the privacy, dignity, well being, and

freedom of research participant. Informed consent means explaining to potential participant

the purpose and the nature of the research so they can freely choose whether or not to

become involved”. It is important that the participants know all the facts before contributing

anything to a study, therefore making sure they are fully aware of what they are participating

in is important. Since our intention was to give all our respondents an overall picture of our

study, we carefully mention that we were student, the purpose with the study as well all the

components of the study. All the respondent of our study were also anonymous, which they

were told in an early stage.

Error  

Data  processing  error  

Data  collection  error  

Sampling-­‐related  error  

Sampling  error  

  31  

4.0 Empirical findings This chapter will start with an introduction of the company that is in focus in this study, ICA,

with an explanation of ICA’s loyalty program. This chapter also consists of the empirical

findings, graphically displayed in histograms. The intention is to, with the help of a

correlation analysis; show whether club card loyalty have a correlation with behavioral- and

attitudinal loyalty. Type– and timing of rewards are showed graphically in histograms as

purpose to show statistical means what kind of reward the respondents prefer.

4.1 ICA Loyalty program ICA is the market leader on the Swedish grocery retail market with a market share of 36%.

ICA’s annual report 2012 states that a Swedish customer spends on average 12 % of their

total income on groceries and that their customers has shown an increased interest for

healthy, environment friendly and convenient solutions when purchasing their groceries.

30 % of the Swedish customers are keeping an eye out for special offers when they decide

where to purchase their groceries. The growing market of technical solutions enabling

customers to easily compare prices on their smartphones has made the market even more

competitive than before. (ICA Annual Report 2012, 2012) (ICA Organization Report 2012,

2012)

Below is ICA’s market share in the Swedish market presented graphically with the

addition to competitor’s market shares in percentages.

Figure 8. ICA and ICA’s competitors market shares in the Swedish market graphically and

percentage. (ICA Annual Report 2012, 2012)

  32  

The “ICA-card” was introduced on the Swedish market in 1990 and ICA states: “You that

shop with the ICA-card always gets more. More food you like. More inspiration in your

everyday life. And more money for other things.” (“Förmåner med ICAs kort,” 2013)

The benefits with the ICA-card are:

• Bonus on everything

• Special prices on different products every week

• Discounts on trips and entertainments

• Personal discount on the products that you regularly buy

For every Swedish Krona spent at ICA, the member earns ICA-bonus point in. Once the

member has accumulated 2500 points, a check of 25 Swedish kronor is received and can be

used at any ICA-store. A loyal member that spends more than 1200 kronor a month at ICA

also receives the magazine “Buffe”, that contains of special offers and recipes. (“Förmåner

med ICAs kort,” 2013)

ICA also offers self-scanning to their members that have ICA-cards. The self-

scanning system implies that the customer scan their groceries directly in the story and pack

them in their bags during the time collecting groceries in the store. This benefit helps the

customer to save time while allowing members to avoid long queues at the checkout points at

busy hours. (“Vanliga frågor och svar | ICA.se,” 2013)

ICA reward card is free of charge, but ICA also provides an ICA-debit/credit card,

that is offer at a low monthly cost. The ICA-debit/credit card thus acts as both a reward card

and a debit/credit card.

4.2 Result A total of 114 surveys were collected and five categories of question were asked; behavioral

loyalty, attitudinal loyalty, club card loyalty, type of rewards and timing of rewards. The

intended purpose with the empirical section is to firstly show the correlation between the

behavioral/attitudinal aspects of loyalty with club card aspect of loyalty. The correlation

matrix from SPSS is found in appendix 4. The result will be show graphically in a histogram

with an explanation of what the histogram implies and the mean values from the respondents

will be presented. Since the intention is to see whether club card loyalty have an impact on

customers store loyalty, a correlations analysis have only been made for the nine questions

under these categories. The questions for each category will be explained in the same

  33  

paragraph and the questions are therefore not in same order as it was in the survey. There will

furthermore not be a correlation explanation between the questions in the same category since

they naturally have a high correlation, there will also be no correlations explained between

the behavioral and attitudinal aspects. As our purpose is to investigate the relation between

club card loyalty with behavioral- and attitudinal loyalty these are the only correlations

presented.

Secondly, the questions under the categories type of reward and timing of reward will

be shown graphically and explained, with the purpose to get en overall picture of what kind

of rewards that the respondents prefer. The VAS scale that has been used contains of 100

steps, where 0 stands for “Do not agree”, “Do not prefer” and “never”, while 100 stands for

“Heavily agree”, “Strongly agree” and “always”.

Instead of presenting the correlation numbers in a numeric sense the correlation scale

of Cohen (1988) is used as seen below.

Figure 4. Correlation guidelines. (Cohen, 1988)

 

 

 

 

 

 

 

 

  34  

4.3 Measurements of store loyalty As previously explained in this section the correlations and mean values of the questions

regarding behavioral- and attitudinal loyalty will be presented. The results are presented

graphically with the help of a histogram.

4.3.1 Behavioral Loyalty Question 1. Do you consider yourself loyal to ICA?

As noted in the histogram the

mean value of question one

regarding whether the

respondents considered

themselves loyal to ICA was

52.37. Thus showing that the

respondents have different

opinion whether they consider

themselves loyal to ICA. What

can be noted however is that

there are more respondents on

the upper scale of the spectrum

than the lower part, meaning there are slightly more that consider themselves loyal than

disloyal. From the correlation analysis we found positive correlations with all of the

questions regarding club card loyalty. One weak positive correlation was found with the

question 8 regarding how often the respondents use their club card. Additionally, two

medium correlations were found with the questions 2 and 13 regarding if the respondents

show more than intended because of the loyalty card, and if the respondent consider himself

or herself more loyal because of the club card.

Figure 9. Question 1

  35  

Question 9. I make the most of my purchases from this retailer.

In question 9 we can note a

mean value of 64,33. There are

clearly more respondents that do

most of their grocery shopping at

ICA. In line with the previous

question we found that there was

a positive correlation with all of

the questions regarding club card

loyalty. Two weak positive

correlations was found with

question 2 and 13, if the ICA

club card makes the respondent

purchase more than intended,

and if the respondent considers himself or herself more loyal because of the fact that they

own a club card. One medium positive correlation were found with question 9 regarding how

often the respondent uses the club card when purchasing groceries at ICA.

Question 16. ICA is my first choice when buying groceries.

A mean value of 63.3 can be

extracted from question 16.

There is a clear distinction

between the respondents. We

can see from the histogram that

the majority of the respondents

feel that ICA is their first choice

when buying groceries.

Regarding correlations the result

was in line with the previous two

questions in behavioral loyalty.

One weak positive correlation

were found with question 2,

“The club card makes me purchase more than intended”. Two medium positive correlations

Figure 10. Question 9

Figure 11. Question 16

  36  

were found with question 13 and 9 regarding how often the respondents used their card, and

if respondents thought they were more loyal to ICA because of the loyalty card.

4.3.2 Attitudinal Loyalty Question 3. Regardless of competitors offers, I always shop at this retailer.

In the histogram a mean value of

32.14 can be extracted. Notably

it is the lowest mean value of the

attitudinal loyalty questions.

Two weak positive correlations

were found with question 2 and

8, if the club card make the

respondents purchase more than

intended because of the club

card, and how often the

respondents used their club card

when purchasing groceries.

Question 12. I feel that whatever occurs I will stay loyal to ICA.

Noted in the histogram is a mean

value of 34.37. Positive

correlations were found with all

of the questions regarding club

card loyalty. One medium

positive correlation was found

with question 8, “How often do

you use the ICA club card when

purchasing at ICA?” Two weak

positive correlations were found

with questions 2 and 13, if the

club card made the respondents

Figure 12. Question 3

Figure 13. Question 12

  37  

purchase more than planned, and if the respondents were more loyal to ICA because of the

club card.

Question 17. Even if ICA were more difficult to reach I would still keep buying from it.

In the histogram regarding

question 17 a mean value of

34.88 could be extracted. In the

correlation analysis we found

that this question correlated with

all of the questions under the

category club card loyalty. Two

medium positive correlations

were found with question 2 and

13, if the ICA club card makes

the respondent purchase more

than intended, and if the

respondent considers himself or

herself more loyal because of the fact that they own a club card. One weak positive

correlation could also be found with question 8 regarding how often the respondents used

their club card when purchasing groceries at ICA.

 

 

 

 

Figure 14. Question 17

  38  

4.4 Type of rewards In this section the type of rewards will be shown graphically and the mean value of each will

be presented and discussed briefly.

4.4.1 Direct vs. Indirect rewards Question 4. For each 100 Swedish kronor spent you receive a voucher worth 5 kronor that

you can spend in the store ICA

In the question regarding direct

rewards a mean value of 61.35

can be extracted from the

histogram. According to the

histogram there were more

respondents that preferred direct

rewards than respondents who

did not.

Question 5. For every 100 Swedish kronor you receive a vouches worth 5 kronor that you can spend in another store in the same town

A mean value of 49.01 can be

noted from the question

regarding indirect rewards. As

the mean value is in the middle it

implies that respondents

indifferent in their preference

about indirect rewards. Notably

is that the extreme point lies in

“prefers a lot”.

Figure 15. Question 4

Figure 16. Question 5

  39  

4.4.2 Monetary vs. Nonmonetary rewards Question 15. I use my ICA club card to reap the benefits of discounts on goods at ICA.

From the histogram a mean

value of 66.61 can be obtained.

From this rather high mean value

it is noted that the majority of

respondents use their club card

to reap the benefits of discounts

at the ICA store. Notably is that

the extreme point is also at “fully

agrees” in this question.

Question 14. I use my ICA club card to reap the reward of the self-scanning system

In the question regarding the

self-scanning system a mean

value of 39.89 can be extracted.

Consequently this implies that

the majority of the respondents

do not make use of the self-

scanning system. These notion

can also be seen in the extreme

points where most respondents

have answered, “do not agree”.

Figure 17. Question 15

Figure 18. Question 14

  40  

4.4.3 Necessary vs. Luxury rewards Question 11. When you go shopping groceries at ICA you receive a 5% discount coupon that you can use to buy basic goods at ICA.

In the histogram presented a

mean value of 57.16 can easily

be seen. A majority of the

respondents would prefer to

obtain a 5 % coupon on basic

goods at ICA.

Question 10. When you go shopping groceries at ICA you receive a 5% discount coupon that you can use to buy more luxurious goods at ICA.

A mean value of 40.16 can be

obtained from the histogram.

Consequently there are more

respondents that do not prefer to

get a coupon they can use for

luxury goods that do prefer that

kind of reward. Notably is also

that there is an extreme point

where most respondent identifies

themselves. This extreme point

lies at the bottom of the scale

“do not prefer”.

Figure 19. Question 11

Figure 20. Question 10

  41  

4.5 Timing of rewards In this section the timing of rewards will be shown graphically and the mean value of each

will be presented and discussed briefly.

4.5.1 Immediate vs. Delayed rewards Question 7. When you go shopping at ICA you receive a 5% discount coupon that you can

use immediately.

From the histogram a mean

value of 36.88 is noted. This

rather low mean value represents

that most of the respondents did

not prefer to get the reward of a

5% coupon immediately. We can

also distinguish a clear extreme

point where the majority of the

respondents answered, “do not

prefer”.

Question 6. When you go shopping at ICA you receive a 7.5% discount coupon that you can

use in one month.

The mean value was 56.37. A

mean value in the middle can be

interpreted that the respondents

are indifferent in this question.

However since the mean is

slightly over the middle value

there are more respondents that

would consider receiving a 7.5

% discount coupon in one month

than who would not like to.

Figure 21. Question 7

Figure 22. Question 6

  42  

5.0 Analysis The intention of the analysis section is to compare the results obtained though the survey and

compare to the previously cited theories. Moreover this section discusses how we interpret

our empirical findings and how we address the research questions stated in this study.

Implications of the results are also reflected on, in the sense of discussions surrounding how

ICA should interpret the results. Most importantly however the analysis should explain how

our research have moved the body of knowledge in loyalty research forward.

5.1 Correlation Analysis Below is our own revised model presented, with the purpose to show the mean correlations,

which will be discussed in upcoming sections.

Figure 23. A revised version of our own model. (Source: Own construction)  

5.1.1 Behavioral Loyalty The value in the model is the mean of all the correlations found with the questions regarding

behavioral loyalty and club card loyalty. The mean positive correlation value was 0.292,

which suggests that there is a substantial positive relation between the two constructs. Our

findings are in line with Noordhoff et al. (2004) although only with their findings in

Singapore and not in The Netherlands. This is interesting in itself since Sweden and The

Netherlands are closer geographically and have a more similar culture than Sweden and

Singapore. However this study and the one made by Noordhoff et al. (2004) is not 100%

comparable since the different studies measure the constructs differently. Notably is however

that there exist some similarities.

Our findings are also contrary to the statement made by Bellizzi and Bristol (2004)

explaining that loyalty card schemes are nothing but mere promotional gimmicks that does

  43  

not affect store loyalty. Since this study found positive correlations between the constructs it

is evident that club card loyalty does affect behavioral loyalty. A positive correlation can

briefly be explained that if the value of one of the constructs raises the other one will rise as

well.

In Sharp and Sharp (1997) research they presented findings suggesting that in an

effective loyalty program, repeat purchase behavior should be affected. As this study found a

positive correlation between the two constructs we show empirically that in the case of ICA’s

loyalty program has an effect on behavioral loyalty. The findings are therefore in line with

Sharp and Sharp (1997) since they explain that a successful loyalty program emphasizes on

building a repeat purchase behavior and therefore operates differently from other marketing

efforts.

The relation that was found between the two constructs may suggest that since ICA

has developed their loyalty program over an extensive period of time it has successfully

gathered the necessary information to construct a successful loyalty scheme. Although

merely having the option to increase club card loyalty, which in term would increase,

behavioral loyalty is a success in itself. Since an increase in repeat purchase behavior will

equal a higher turnover and in turn higher profit for ICA they could achieve this by focusing

on attaining a higher club card loyalty amongst its customers.  

5.1.2 Attitudinal Loyalty Our findings showed that club card loyalty has a positive correlation to the attitudinal aspect

of loyalty. The mean positive correlation between the two constructs was 0.305. Demoulin

and Zidda (2009) discovered in their study that the attitudinal aspect of loyalty had a greater

impact on club card loyalty than the behavioral aspect had. In this study a similar result was

found since attitudinal loyalty had a slight higher positive mean correlation than behavioral

loyalty.

Bridson et al. (2008) explains that while the behavioral aspect focuses on a more

short-term repeat purchase behavior, attitudinal loyalty focuses on creating a long-term

relationship built through commitment. As long term-relationships are harder to maintain

than short-term relationships, long term-relationships are therefore more important for the

sustainability of ICAs business. It could therefore be argued that attitudinal loyalty is more

important since it creates what several previous authors have referred to as “true loyalty”.

From this notion our interpretation of the findings is even more interesting since it

shows that “true loyalty” can be enhanced by attaining a higher grade of club card loyalty

  44  

amongst ICA’s customers. Previous research, such as Noordhoff et al. (2004) however argue

that loyalty programs do not at all contribute to the attitudinal aspect of loyalty and therefore

cannot create any form of sustainable loyalty. This is again contradictory to what we found in

our study since we found a positive correlation between the two constructs.

As attitudinal loyalty is heavily linked with the commitment of the customer we argue

that it is hard to achieve this type of loyalty in a homogenous business such as the grocery

retail business. Customers can therefore change retailer easily, and this could be an

explanation to the correlation since it creates a competitive advantage over ICA’s

competitors. The loyalty program could act as a differentiation mechanism that according to

our findings does impact the customer’s commitment.

5.1.3 Type and timing of rewards Below is our own revised model since the mean values were added with the purpose to give a

clear picture of the result. The four rewards: direct- versus indirect, monetary- versus

nonmonetary, necessary- versus luxury and immediate- versus delayed are analyzed further

based on the model.

 

Figure 24. A revised version of our own model. (Source: Own construction)

  45  

Direct vs. Indirect

Yi and Jeon (2003) and Keh and Lee (2006) both argue that direct rewards are more

preferable than indirect rewards since it increase value for the primary product and/or the

brand. Dowling and Uncles (1997) states that if the indirect rewards were preferable, the

customer would probably go somewhere else if the indirect reward would disappear, since

the purchase in itself is mainly to achieve value somewhere else.

The outcome in this study is in line with previous research, the mean value was higher

for direct rewards than for indirect rewards and the direct rewards were therefore more

preferable for the respondents. Surprisingly the differences were not so big between the

questions, since direct reward showed a higher mean value of 61.35 and indirect had a mean

value of 49.01. Therefore it seems that many of the respondents were unconcerned whether to

receive a discount in the primary store or in another store. This might suggest that the

respondents need to purchase groceries no matter what, and a discount in a different store

could be a pleasant and unexpected surprise. We do however believe that the most loyal

customers prefer to get a discount in the primary store, since they often purchase their

groceries at ICA. We agree with Dowling and Uncles (1997) that direct rewards should be

more efficient than indirect rewards in building customer loyalty.

Monetary versus non-monetary

The result in this study showed a significant difference in preference between monetary and

non-monetary rewards. Monetary rewards showed a mean of 66.61, while non-monetary

showed a mean of 39.89. The respondents are therefore to a larger extent using their club

card to benefit from the discount in the store, where the customers gain financially, instead of

the self-scanning system where the customer saves time. The findings in this study are in the

same line with Jang and Mattila (2005) that also stated that monetary rewards are more

preferable, with the argument that is gives the customer more flexibility.

Mimouni-Chaabane and Volle (2010) argue that it is important to have both monetary

and non-monetary rewards since the two concepts balanced each other. Since ICA uses both

monetary and non-monetary rewards, we agree with Mimouni-Chaabane and Volle (2010)

that argues that both are useful, even if one is more preferable. Even if the customers prefer

monetary rewards, non-monetary rewards do not have to be excluded. The use of both

monetary and non-monetary rewards can make ICA differentiate itself from their

competitors, since is can be hard for other grocery retailers to copy ICA’s non-monetary

rewards.

  46  

Necessary versus Luxury

Previous research in the subject lack consensus since Kivetz et al. (2004) argue that

customers are more likely to prefer luxury- over necessary rewards while Jang and Mattila

(2005) state that customers prefer necessary rewards over luxury rewards. Our study’s results

are in the same line as Jang and Mattila (2005) since our respondents prefer necessary- over

luxury rewards, with means of 57,16 for necessary to 40,16 for luxury. Since ICA is a

grocery retailer and humans need food to survive, we assume that grocery stores in general

are seen as a necessity. There is therefore more likely that customers prefer necessary over

luxury items. We do argue and believe that luxury rewards will be more and more in focused

on in the grocery retailer category. Kivetz et al (2004) argue that customers to a greater

extends are more likely to enroll in a loyalty programs if they offer luxury rewards. We argue

that necessary products are in focus today, but with an increase of the selection of groceries,

the focus will probably shift towards luxury products and rewards in the future.

Immediate versus delayed

According to Yi and Jeon (2003) the customer’s degree of involvement is essential if the

customer prefer an immediate or a delayed reward while Rowley (2007) argues that

immediate rewards are more effective than delayed rewards when building loyalty in low-

involvement situations. The result in this study showed a mean value of 36.88 for immediate

and 56,37 for delayed, which indicate that the respondents are more likely to prefer delayed

rewards instead of immediate rewards. Previous research stated that preferring delayed

rewards is related a higher involvement from the respondents (Yi and Jeon, 2003). Keh and

Lee (2006) argues that delayed reward tends to be more successful if the customer is already

satisfied, which also can be a contributing factor to why the respondent prefer delayed

rewards. Previous studies have however concluded that customers seem to prefer immediate

rewards to delayed rewards (Dowling and Uncles, 1997; Jang and Mattila, 2005; Rowley,

2000; Yi and Jeon, 2003). Since the result in this study is contradictory to previous studies,

factors such as strong loyalty to ICA, high-involvement, a well developed loyalty program

and high-satisfaction might be reasons to why more respondent seem to prefer delayed

rewards over immediate rewards.

 

  47  

5.2 Cluster Analysis In addition to the correlations analysis a cluster analysis has been conducted. A cluster

analysis discovers structures in raw data without giving an explanation or interpretation of the

data. The purpose of conducting a cluster analysis is to segment the respondents in our study

in different clusters that can be analyzed. With the help of SPSS five different clusters were

developed, which can also be referred as groups. Three of the clusters consist of men and two

consists of women, and the entire 114 respondents are included in the cluster analysis. A

table is shown in each of the clusters that visually describe the most relevant values in each

cluster. The values of the cluster groups will also be explained and analyzed for each cluster.

The entire cluster matrix can be found in appendix 5.

Cluster 1, “The comfortable man”

The first cluster group consists of 11 men, and this group has the highest income amongst the

cluster groups, which was between 27500 and 32500 SEK a month. This is also notably the

smallest group of all the clusters. These men prefer indirect and immediate rewards according

to the cluster, while non-monetary rewards are not preferable at all. These men therefore

prefer rewards they can use at ICA during their current purchase or that they can use in a

different store in the same city. They however do not prefer to use the self-scanning system.

Our interpretation could therefore be that these men does not put effort in shopping for

grocery and they prefer rewards that are easy, such as discounts that can be used the same

day or discounts that can be used in a store that are more preferable for them. They might

believe that the self-scanning system is too complex, we firmly believe that these men are

normally not the one who makes the majority of grocery purchases in their household.

Cluster one also presented low values on two of the questions under the category

attitudinal loyalty. Consequently they do not consider themselves to be loyal no matter what

will happen, and they would not continue purchasing groceries from ICA if it harder to reach.

This also indicates that these men are probably comfortable since they prefer to purchase

groceries at a store that is easy to reach. An explanation could be that the focus in these men's

lives are not purchasing groceries, and they do not care about which grocery retailer they visit

as long as it is easy and convenient, these men might see grocery shopping as a necessary

evil. According to Bridson et al. (2008) the attitudinal aspect of loyalty is to build a long-term

relationship through commitment, exactly what these men seem to lack, commitment to ICA.

  48  

Q5 Indirect. Reward in another store. 78

Q7 Immediate. 5% today. 81

Q12 AL. Will always stay loyal, no matter what 15

Q14 Non-monetary. Use of self-scanning system 5

Q17 AL. If the store was more hard to get to. 14

Figure 25. Cluster 1.

Cluster 2, “The dream customer”

This cluster is the largest of all the clusters, and consists of 31 women. The income of the

cluster as well in the next three clusters is 22500 to 27500 SEK a month. This cluster of

women shows a preference of all the three questions in the category behavioral loyalty as

well as under one question in the category attitudinal loyalty. These women consider

themselves loyal to ICA, they preferable purchase their groceries at ICA even if competitors

have better offers, they do most of their purchases at ICA and ICA is their first choice. This

cluster of women also shows a high preference regarding the question how often they use

their ICA card. Our interpretation is that these women are the main shoppers in their

households and they put a lot of thought and energy on purchasing their groceries. They

probably see the loyalty program as an important way to benefit them as it saves them

money. These women are from our perspective the dream customers of ICA since they are

loyal and satisfied customers of ICA. The behavioral dimension of loyalty mainly consists of

two element, repeat purchase and word of mouth behaviors (Bridson et al., 2008; Leenheer et

al., 2007; Sharp and Sharp, 1997). We believe that these women are important customers for

ICA since they probably excels in both repeat purchase behavior and word of mouth which

ultimately increases the profit for ICA as well as attracting more customers.

Q1 BL. Loyal against ICA. 80

Q3 AL. Chose ICA regardless of others offers 66

Q8 CCL. Use of the ICA card. 90

Q9 BL. Most purchase in ICA. 86

Q16 BL. ICA is the first choice. 86

Figure 26. Cluster 2

  49  

Cluster 3, “The pessimistic shopper”

Cluster three consists of 24 men and has the same average income as cluster two. This is also

the largest cluster of men out of all the clusters. In the question category attitudinal loyalty,

this cluster showed a low value on two of the questions regarding that these men will not

always stay loyal to ICA, and that they prefer to go somewhere else if they have better offers.

Additionally a low value was attained in a club card related question as well, which stated

that they do not shopping more than planned because of the club card. Our interpretation of

this is that the men do not seem to care whether they buy their groceries at ICA, or if they

buy them elsewhere. This cluster of men also is negative towards direct rewards, which

supports the fact that they don't care whether they get a discount in the store that they can use

directly. This would mean that instant discounts do not attract this cluster of men at all,

however they do prefer necessary rewards and they therefore prefer to get discounts on basic

goods but not straight away. Our explanation is therefore that this cluster would prefer to

shop in a low-price grocery chain where the prices are lower on basic groceries supplies.

Demoulin and Zidda (2009) argue that “true” loyalty only exists when customers have a

favorable attitude or a high preference for the store, and in our opinion this cluster seems not

to have any or enough loyalty towards ICA.

Q2 CCL. Buy more because of the card 28

Q3 AL. Chose ICA regardless of others offers 13

Q7 Immediate. 5% today 25

Q11 Necessary. 5% to buy basic groceries. 72

Q12 AL. Will always stay loyal, no matter what 13

Figure 27. Cluster 3.

Cluster 4, “The king of rewards”

Cluster four consists of 22 men, and has the same average income as cluster two and three.

This group of men showed a high preference that they are more loyal towards ICA because of

the club card as well as that they had high preferences for direct rewards, luxury rewards,

monetary- and non-monetary rewards. Since this cluster of men shows a high preference for

many of the rewards, our interpretation is that these men prefer ICA because of its loyalty

program and the rewards that come with it. These men use all of the rewards they get from

  50  

the loyalty program to its fullest extent and are satisfied with all of the benefits that derive

from the loyalty card. Rowley (2007) state that the link between loyalty and the loyalty card

is important since it can be a crucial factor if the retailer wants to build a lasting relationship

with the customer. That statement fits perfectly in this cluster, since we argue that these men

are loyal because of the club card. Additionally, the monetary and non-monetary rewards,

which this cluster both prefers, Mimouni-Chaabane and Volle (2010) argue that both of these

reward should be incorporated in a loyalty program since they equality can get a customer to

enroll in the loyalty program. Consequently the monetary and non-monetary rewards are

successful factor for this cluster, since they prefer to get discount in the store as well as using

the self-scanning system.

Q4 Direct. Discount on ICA. 77

Q10 Luxury. 5% to buy luxury groceries. 66

Q13 CCL. More loyal because of the card. 77

Q14 Non-monetary. Use of self-scanning system 69

Q15 Monetary. Prefer the discount in the store 81

Figure 28. Cluster 4.

Cluster 5, “The disloyal women”

Cluster five consists of 26 women and is the second largest amongst the clusters. This cluster

has the same average income as cluster two, three and four. This cluster of women have an

above average preference of how often they using the club card, they do however have a low

preference concerning questions in the category club card loyalty, behavioral loyalty and

attitudinal loyalty. These women do not consider themselves loyal to ICA, they rather prefer

the competitors stores if they have a better offer, they will not be loyal to ICA regardless of

what happens and they don't agree that owning a ICA club card makes them shop more than

they intended. These women use their loyalty card almost every time they go grocery

shopping at ICA, although they seem not to show any loyalty to the ICA store. According to

Mauri (2003) was the loyalty card created in the purpose to strengthen store loyalty and to

build a stronger customer relationship. That did not work in this case, since our interpretation

is that these women don’t seem so interested in the loyalty program regardless even if they

use the card to reap the benefits. An explanation could be that these women have several

  51  

different loyalty cards from many different retailers in their wallets, and are therefore not

loyal to any store. Mauri (2003) states that because customers subscribe to the loyalty

scheme, customer loyalty does not automatically rise, which seems like a good assumption

for this cluster.

Q1 BL. Loyal against ICA. 24

Q2 CCL. Buy more because of the card 19

Q3 AL. Chose ICA regardless of others offers 8

Q8 CCL. Use of the ICA card. 60

Q14 Non-monetary. Use of self-scanning system 14

Figure 29. Cluster 5.

5.3 Summary of the analysis The behavioral aspect of loyalty showed a mean correlation value of 0.292 with the aspect of

club card loyalty. Which in terms mean that an increase in club card loyalty would contribute

to a increase in behavioral loyalty. This relation was also found between the attitudinal aspect

of loyalty and club card loyalty, which had a mean correlation value of 0.305. The results

were interesting since they contradict the notion that loyalty schemes are nothing but a mere

promotional gimmick.

All of the types of rewards were in line with previous research, however the results

from the concept of timing of reward were contradictory to previous research. Delayed

rewards were preferable to ICAs customers rather than immediate rewards. The reason for

this could be because delayed rewards tends to be more preferable when the customer is

already satisfied (Keh and Lee, 2006).

Five clusters were created with the help of the cluster analysis, three clusters of men

and two clusters of women. The clusters names derived from the analysis made, the names of

the clusters are: “The comfortable man”, “The dream customers”, “The pessimistic shopper”,

“King of rewards”, and “The disloyal woman”. The cluster that were most prominent were

the “The disloyal woman” who used their loyalty card every time although they didn’t like

the rewards.

  52  

6.0 Conclusion The conclusion chapter intends to give answers to the research questions and to present the

focal points of the analysis. Furthermore will this chapter include managerial, societal and

theoretical implications as well as critical reflections and proposal to further research.

6.1 Answering the research questions With the help of the correlation analysis that was made we can conclude that our first

research question regarding if club card loyalty has an impact on store loyalty was positive.

Earlier research in the subject have lacked consensus whether club card loyalty could impact

the behavioral- and attitudinal aspect of loyalty. Our results show that club card loyalty has a

positive correlation with both behavioral- and attitudinal loyalty, therefore it can be

concluded that there is a relation between the concepts. Since it can be hard to enhance both

behavioral loyalty, which includes a repeat purchase behavior, and attitudinal loyalty, which

includes a customer’s commitment. Our result showing that store loyalty can in fact be

affected through club card loyalty is therefore interesting. A reason why it is hard to enhance

behavioral- and attitudinal loyalty is the homogenous grocery market and that most retailers

use the same type of advertisement to attract customers. From our findings in this study it can

be concluded that ICA can enhance their store loyalty by focusing on attaining a higher

degree of club card loyalty.

The second research question of this study regarded which kind of reward attributes

the customers of ICA preferred. The results of our study regarding the types of rewards;

direct- versus indirect rewards, monetary- versus non-monetary rewards, and necessary-

versus luxury rewards all were in line with previous research. Notable was however that the

respondents to some extent preferred indirect rewards almost as much as they preferred direct

rewards. Since ICA does not provide any indirect rewards this result could potentially

indicate that ICA should provide some form of indirect reward since it seems to be of interest

to their customers. Another result in our findings was that ICA’s customers rather prefer

delayed rewards to immediate rewards. This notion is against the majority of research done

who says that direct rewards are more preferable. Some authors explain this by mentioning

that customers that prefer delayed rewards also often show a higher amount of involvement

in the loyalty program. This result might be the consequence that ICA has for a long time

worked with delayed rewards in forms of discount coupons that are sent frequently to loyal

  53  

customer, as a result of the bonus point that the customer can collect. It seems that ICA has

managed to develop their delayed rewards to something that their customers really value.

6.2 Managerial, societal and theoretical implications Several conclusions can be obtained from the cluster analysis, which can be seen as

managerial implications to benefit ICA on how to improve their loyalty program. We can

conclude that cluster 2; “The dream customer” contains the most loyal customers that will no

matter what stay loyal to ICA. With this notion ICA should cherish their customers and keep

them happy as they spread positive word of mouth that enhances behavioral loyalty. It is also

notable that this cluster is the biggest amongst all of the clusters, which might imply that ICA

is on the right track with their loyalty program. A second group that ICA should cherish is

cluster 4: “King of rewards”. This cluster of men use their loyalty card to the fullest and reaps

every benefit that comes with. ICA should in the same sense as before target this group with

additional benefits so they do not change grocery retailer because they have better offers. A

third, arguably the most important cluster is cluster 5; “The disloyal women”, the second

largest cluster and who always use their club card without showing any store loyalty. ICA

should focus on why these women are dissatisfied to make them more loyal.

We argue that ICA, with the results of this study supporting our claims contemplates

the fact that there is a positive correlation between club card loyalty and behavioral- and

attitudinal loyalty. Since all of the largest grocery retailers on the Swedish market have

adapted some form of loyalty program it is of greatest importance to continue to develop and

improve their loyalty program. Due to the rapid technical advancements being made today all

grocery retailers on the Swedish market should continuously improve their program to

capture future customers.

It can be argued that our study has some societal implications in the sense that it gives

ICA the opportunity to create a better loyalty scheme that will ultimately benefit the

customers. Since groceries are a necessary product for every individual’s survival a more

complex and dynamic loyalty scheme would benefit all of society.

The results of this study have had impact on the theoretical framework used. Due to

the fact that we found contradictory results in the timing of reward. Also the fact that all of

the types of rewards were in line with previous research has implications since it strengthens

those theories. The study has also contributed to close the gap between different researchers

that argues that loyalty schemes are nothing but a mere marketing tool that does not create

  54  

any form of sustainable loyalty. Since this study has proven that in this case the loyalty

scheme had an impact on store loyalty.

6.3 Critical reflections of our study A general problem with case studies is the ability to be able to generalize the findings, in this

case to the whole of Sweden. There is always the possibility that the results would have been

slightly different if the study was conducted in another city or region. Another possibility that

could slightly change the results is the chosen store in the study, using a smaller ICA store

could potentially have shown different results. A mix of smaller and larger ICA stores would

in our minds have been optimal considering everything we’ve learnt throughout the process.

Unique issues for this study could be seen as the place inside the store where we collected the

data, although this was nothing we could have affected since it was mainly the ICAs

management decision.

By conducting this study we have learned that by doing extensive research in

the chosen field before you start writing was for us helpful. Consequently the theoretical

framework that was generated became a solid foundation to our own research. If we were to

conduct further research in the same topic we would have asked more questions regarding the

different rewards, and as previously mentioned we would select our respondents from several

stores of different sizes.

6.4 Proposal to further research With the interesting results of this study it would be interesting to see whether a similar study

being made on another grocery retailer on the Swedish market to get comparable results. A

comparison between two different loyalty programs would give an enhanced perception on

what the Swedish customers actually prefers. A suggestion is to replicate this study on a

foreign grocery retailer and their customers to document the differences across nations as

well.

  55  

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Appendices Appendix 1. The process of selecting constructs for this study

Construct Questions related to the construct Article number and Author discussing the construct

Behavioral Loyalty (Store Loyalty)

1. Do you consider yourself loyal to XX? 2. I consider myself a regular customer of this retailer. 3. I consider this retailer to be my first choice when shopping for the category of good it sells. 4. I intend to do more business with this retailer in the future. 5. I always find myself consistently buying from this particular retailer. 6. I make most of my purchases from this retailer. 7. I feel valued as a customer at XX.

(Bridson et al., 2008) (Turner and Wilson, 2006) (Sharp and Sharp, 1997) (Demoulin and Zidda, 2009) (Rowley, 2007) (Leenheer et al., 2007) (Noordhoff et al., 2004) (Keh and Lee, 2006)

Attitudinal Loyalty (Store Loyalty)

1. Even if this retailer were more difficult to reach I would still keep buying from it. 2. Regardless of competitors offers, I always shop at this retailer. 3. I would never consider switching to another retailer. 4. Even if another retailer had a sale, I would still buy from this retailer. 5. If this particular retailer were closed, I would find it difficult to find a substitute retailer. 6. I feel that whatever occurs I will stay loyal to this retailer. 7. I feel that I am a regular customer of this retailer

(Bridson et al., 2008) (Uncles et al., 2003) (Demoulin and Zidda, 2009) (Rowley, 2007) (Noordhoff et al., 2004)

Club Card Loyalty

1. The club card makes me shop at XX more often. 2. The club card influences me to visit the store more often. 3. Are you more loyal towards XX because of the club card? 4. How often do you use your loyalty card?

(Turner and Wilson, 2006) (Mauri, 2003) (Rowley, 2007) (Demoulin and Zidda, 2009) (Noordhoff et al., 2004) (Demoulin and Zidda, 2008) (Dowling and Uncles, 1997) (Rowley, 2000) (Bellizzi and Bristol, 2004)

  60  

General Loyalty (McIlroy and Barnett, 2000) (Dowling and Uncles, 1997) (Yi and Jeon, 2003) (Jang and Mattila, 2005) (O’Malley, 1998) (Bellizzi and Bristol, 2004) (Leenheer et al., 2007) (Mägi, 2003) (Noordhoff et al., 2004) (Mimouin-Chaabane and Volle, 2009) (Rowley, 2000)

Direct vs. Indirect (Type of Reward)

Direct: 1. For every 100-dollar spent I get a 10-dollar voucher that I can spend in the store Indirect: 1. For every 100-dollar spent I get a 10-dollar voucher in another store (examples movie theater, clothing store etc.)

(Dowling and Uncles, 1997) (Yi and Jeon, 2003) (Rowley, 2007) (Keh and Lee, 2006)

Immediate vs. Delayed (Timing of Reward)

Immediate: 1. A 5% discount on my current purchase Delayed: 1. Get a 5% discount coupon valid a month from now

(Dowling and Uncles, 1997) (Yi and Jeon, 2003) (Jang and Mattila, 2005) (Rowley, 2007) (Keh and Lee, 2006)

Monetary vs. Nonmonetary (Type of reward)

(Jang and Mattila, 2005) (Mimouin-Chaabane and Volle, 2009)

Necessary vs. Luxury (Type of Reward)

(Jang and Mattila, 2005) (Rowley, 2007) (Kivetz and Simonson, 2002),

  61  

Appendix 2. The original questionnaire  

Gender     Man     Women  

 

 

Age           15-­‐25     25-­‐35     35-­‐45     45-­‐55     55-­‐65     65+  

 

 

 

Income  per  month     0-­‐17500  

17500–22500  

22500–27500  

27500–32500  

32500–37500  

37500–42500                        

42500  +  

 

Please  mark  the  line  with  an  X  in  the  spectrum  you  fit  (example  below)    

         

 

 

Thank  you  for  your  corporation!  

 

  62  

1.  Do  you  consider  yourself  loyal  to  ICA?  

Do  not  agree                                                       Strongly  agree  

2.  The  ICA  club  card  makes  me  shop  more  then  I  planned.      

Do  not  agree                     Strongly  agree  

3.  Regardless  of  competitors  offers,  I  always  shop  at  this  retailer  

Do  not  agree                     Strongly  agree  

4.  For  each  100  Swedish  kronor  spent  you  receive  a  voucher  worth  5  kronor  that  you  can  spend  in  

the  store  ICA  

Do  not  prefer                                   Heavily  prefer  

5.  For  every  100  Swedish  kronor  you  receive  a  vouches  worth  5  kronor  that  you  can  spend  in  

another  store  in  the  same  town    

Do  not  prefer                                     Heavily  prefer  

6.  When  you  go  shopping  at  ICA  you  receive  a  5  %  discount  coupon  that  you  can  use  in  one  month.  

Do  not  prefer                                       Heavily  prefer  

7.  When  you  go  shopping  groceries  at  ICA  you  receive  a  5%  discount  coupon  that  you  can  use  to  

buy  more  luxurious  goods  at  ICA.  

Do  not  prefer                                     Heavily  prefer  

8.  How  often  do  you  use  you  club  card  when  purchasing  good  at  ICA?    

Never                       Always  

9.  I  make  the  most  of  my  purchases  from  this  retailer.  

Do  not  agree                     Strongly  agree  

  63  

10.  When  you  go  shopping  groceries  at  ICA  you  receive  a  5%  discount  coupon  that  you  can  use  to  

buy  more  luxurious  goods  at  ICA.  

Do  not  prefer                                        Heavily  prefer  

11.  When  you  go  shopping  groceries  at  ICA  you  receive  a  5%  discount  coupon  that  you  can  use  to  

buy  basic  goods  at  ICA.  

Do  not  prefer                                         Heavily  prefer  

12.  I  feel  that  whatever  occurs  I  will  stay  loyal  to  ICA.  

Do  not  agree                     Strongly  agree  

13.  Are  you  more  loyal  to  ICA  because  of  the  club  card?    

Do  not  agree                     Strongly  agree  

14.  I  use  my  ICA  club  card  to  reap  the  reward  of  the  self-­‐scanning  system  

Do  not  agree                       Strongly  agree  

15.  I  use  my  ICA  club  card  to  reap  the  benefits  of  discounts  on  goods  at  ICA.  

Do  not  agree                     Strongly  agree  

16.  ICA  is  my  first  choice  when  buying  groceries.  

Do  not  agree                     Strongly  agree  

17.  Even  if  ICA  were  more  difficult  to  reach  I  would  still  keep  buying  from  it.  

Do  not  agree                     Strongly  agree  

             

 

  64  

Appendix 3. The questionnaire translated into Swedish  

Kön       Man     Kvinna  

 

 

Ålder           15-­‐25     25-­‐35     35-­‐45     45-­‐55     55-­‐65     65+  

 

 

 

Inkomst  per  månad     0-­‐17500  

17500–22500  

22500–27500  

27500–32500  

32500–37500  

37500–42500                        

42500  +  

 

Vänligen  sätt  ett  kryss  på  linjen  där  du  anser  dig  hålla  med  eller  inte  hålla  med  de  olika  

påståendena  (exempel  nedan)  

         

 

 

Tack  för  din  medverkan!  

  65  

1.  Anser  du  dig  vara  lojal  mot  ICA?    

Håller  inte  med                                                       Håller  med  

2.  ICA  klubb  kort  gör  att  jag  handlar  mer  än  planerat    

Håller  inte  med                     Håller  med  

3.  Oavsett  vilka  erbjudanden  ICAs  konkurrenter  har  så  handlar  jag  alltid  på  ICA    

Håller  inte  med                     Håller  med  

4.  För  varje  100  kronor  spenderat  på  ICA  får  du  en  5  kronors  rabattkupong  som  du  kan  använda  på  

ICA    

Föredrar  inte                                Föredrar  mycket  

5.  För  varje  100  kronor  spenderat  på  ICA  får  du  en  5  kronors  rabattkupong  som  du  kan  använda  i  

en  annan  affär  i  samma  stad  

Föredrar  inte                                  Föredrar  mycket  

6.  När  du  handlar  på  ICA  får  du  en  5  %  rabattkupong  som  du  kan  använda  om  en  månad    

Föredrar  inte                                    Föredrar  mycket  

7.  När  du  handlar  på  ICA  får  du  en  5  %  rabattkupong  som  du  kan  utnyttja  samma  dag    

Föredrar  inte                                  Föredrar  mycket  

8.  Hur  ofta  använder  du  ICA  kortet  när  du  handlar  på  ICA?    

Aldrig                       Alltid  

9.  Jag  gör  de  flesta  av  mina  inköp  på  ICA    

Håller  inte  med                     Håller  med  

  66  

10.  När  du  handlar  på  ICA  får  du  en  5  %  rabattkupong  som  du  kan  utnyttja  för  att  köpa  lite  finare  

lyxigare  varor  på  ICA    

Föredrar  inte                                        Föredrar  mycket  

11.  När  du  handlar  på  ICA  får  du  en  5  %  rabattkupong  som  du  kan  utnyttja  för  att  köpa  basvaror  på  

ICA.    

Föredrar  inte                                      Föredrar  mycket  

12.  Oavsett  vad  som  händer  så  kommer  jag  alltid  att  vara  lojal  till  ICA    

Håller  inte  med                     Håller  med  

13.  Är  du  mer  lojal  till  ICA  på  grund  av  ICA  klubbkort?    

Håller  inte  med                     Håller  med  

14.  Jag  använder  mitt  ICA  klubbkort  för  att  dra  nytta  av  själv-­‐scanning  systemet    

Håller  inte  med                       Håller  med  

15.  Jag  använder  mitt  ICA  klubbkort  för  att  dra  nytta  av  rabatter  på  varor  i  butiken  

Håller  inte  med                     Håller  med  

16.  ICA  är  mitt  förstaval  när  jag  handlar  matvaror    

Håller  inte  med                     Håller  med  

17.  Även  om  ICAs  matbutik  var  mer  svårtillgängligt  så  skulle  jag  handla  där    

Håller  inte  med                     Håller  med  

             

 

  67  

Appendix 4. The correlations analysis

  68  

Appendix 5. The cluster analysis Cluster

1 2 3 4 5

Gender 1 2 1 1 2

Age 3 4 3 3 4

Income 4 3 3 3 3

Question 1 BL 36 80 46 62 24

Question 2 CCL 51 42 28 60 19

Question 3 AL 22 66 13 39 8

Question 4 Direct 68 74 62 77 30

Question 5 Indirect 78 32 56 68 36

Question 6 Delayed 52 64 59 67 37

Question 7 Immediate 81 22 25 67 21

Question 8 CCL 78 90 88 93 60

Question 9 BL 72 86 57 73 34

Question 10 Luxury 36 38 33 66 29

Question 11 Necessary 54 56 72 73 33

Question 12 AL 15 62 13 53 14

Question 13 CCL 27 43 50 77 18

Question 14 Non-monetary 5 27 61 69 25

Question 15 Monetary 58 73 70 81 49

Question 16 BL 66 86 58 81 25

Question 17 AL 14 52 17 62 17